Vancouver reviews land purchase by brothers tied to troubled Olympic Village project

Entire block at 1500 East Hastings purchased by Shahram and Peter Malek for $5.5 million

Vancouver Olympic Village

Photograph by: Les Bazso
, PNG

Vancouver is reviewing the recent purchase of an East Hastings Street property by the Malek brothers to make sure they've complied with the terms of a settlement agreement involving the city taking over the troubled Olympic Village.

City Manager Penny Ballem said the purchase of the entire block at 1500 East Hastings by Shahram and Peter Malek for $5.5 million doesn't appear to violate the terms of a settlement the pair gave in November, 2011 when the city forced their financially-troubled Millennium Developments company into "voluntary" receivership.

At the time, Millennium owed more than $578 million in loans the city gave in an effort to get the project finished in time for the 2010 Winter Olympics. The city, which owned the land, eventually took over the development and is still selling units off to pay down the debt. Last fall it wrote down $48 million in debts.

As part of the settlement the Maleks turned over 32 other properties they owned around the province that had a net value of $45 million. The city declined to take a number of properties that were heavily mortgaged and had no equity.

But in December, the city became aware that the Maleks recently bought the East Hastings Street property between Woodlands and McLean Streets for a potential development. The land had been used by the Morrey Mazda auto dealership and would need to be rezoned. News of the purchase immediately triggered a review to ensure the Maleks hadn't broken their settlement agreement by hiding assets that the city could use, Ballem said.

"We're tracking everything they do," she said. "What we know is the property is heavily leveraged, mortgaged to nearly $2 million beyond what they actually paid for it. There is no equity in it."

Ballem said her staff determined that the Maleks used assets from a family trust as collateral for the property, which was bought under a company called Woodlands Hastings Property Corp. The city was aware of the family trusts at the time of the Olympic Village settlement but was told it couldn't legally seize them as part of the receivership agreement, she said.

Mortgage documents attached to the land titles show the Maleks and several others took out a $7.12 million mortgage from Realtech Capital Group in the name of Woodlands Hastings Property. B.C. Assessment records show the Maleks purchased the property, in two parcels, for $5.5 million on Dec. 12. The most recent assessment values the land at $5.77 million.

Calls to both Shahram and Peter Malek for comment were not returned.

Ballem said the city is confident it obtained in the Olympic Village settlement every useful asset the Maleks had with one exception; it left them with a highrise development at Bidwell and Davie Streets that had some equity. The city also took out a mortgage on the property but the Maleks have since repaid it, she said.

Leaving the Maleks with one property that had some residual equity was a strategic move to convince them to file for voluntary receivership.

"All the advice we had ... is that you need to leave something for a developer to carry on otherwise they don't have any incentive to negotiate. They will sit back and say "come after me, take me to court," she said.

Ballem said the city's review of the purchase doesn't mean it believes the Maleks have not been forthright in their settlement agreement.

"We have a very respectful relationship with them. They know our responsibility to the public in doing our due diligence, but we are absolutely not in any way inferring that they have done anything inappropriate," she said. "Up to now they have absolutely honoured the agreement they signed."

Having said that, the city "will keep an eye on them for assets for a while," Ballem said.